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The following table projects the potential impact on interest income and interest expense for a 12-month period, assuming an instantaneous increase or decrease of 15 basis points and an increase of 25 basis points in LIBOR (in thousands).
−Removed: As a result of LIBOR rates being close to zero as of June 30, 2020, we have excluded the impact of a 25 basis point decrease in LIBOR.
+Added: Because LIBOR rates were close to zero at September 30, 2020, we have excluded the impact of a 25 basis point decrease in LIBOR.
Assets (Liabilities)
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(1) Represents the UPB of our loan portfolio and the principal balance of our debt.
−Removed: Based on our structured loans and investments and corresponding debt as of June 30, 2020, increases in LIBOR of 0.15% and 0.25% would decrease our annual net interest income as a result of LIBOR floors on a portion of our loan portfolio that are above LIBOR as of June 30, 2020, which would limit the effect of an increase on interest income.
+Added: Based on our structured loans and investments and corresponding debt as of September 30, 2020, increases in LIBOR of 0.15% and 0.25% would decrease our annual net interest income as a result of LIBOR floors on a portion of our loan portfolio that are above LIBOR as of September 30, 2020, which would limit the effect of an increase on interest income.
Conversely, these LIBOR floors would reduce the impact on interest income from decreases in LIBOR, which would result in increases to net interest income.
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While the interest rates on these balances are not indexed to LIBOR, they are negotiated periodically with each corresponding bank based on certain benchmark rates.
−Removed: Based on our balances as of June 30, 2020 , a 25 basis point and a 50 basis point increase in rates would result in an increase in our annual interest received of $3.8 million and $7.5 million, respectively.
+Added: Based on our balances as of September 30, 2020 , a 25 basis point and a 50 basis point increase in rates would result in an increase in our annual interest received of $3.6 million and $7.2 million, respectively.
Conversely, a 25 basis point and a 50 basis point decrease in rate would result in a decrease of our annual interest received by the same amounts.
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Our Swap Futures are tied to the five-year and ten-year swap rates and hedge our exposure to changes in the fair value of our Structured Business SFR loans and held-for-sale Agency Business Private Label loans until the time they are securitized.
−Removed: A 25 basis point and a 50 basis point increase to the five-year and ten-year swap rates on our Swap Futures held at June 30, 2020 would have resulted in a gain of $0.7 million and $1.5 million, respectively, in the six months ended June 30, 2020, while a 25 basis point and a 50 basis point decrease in the rates would have resulted in a loss of $0.8 million and $1.5 million, respectively.
+Added: A 25 basis point and a 50 basis point increase to the five-year and ten-year swap rates on our Swap Futures held at September 30, 2020 would have resulted in a gain of $0.9 million and $1.7 million, respectively, in the nine months ended September 30, 2020, while a 25 basis point and a 50 basis point decrease in the rates would have resulted in a loss of $0.9 million and $1.8 million, respectively.
Our Agency Business originates, sells and services a range of multifamily finance products with Fannie Mae, Freddie Mac and HUD.
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In addition, the fair value of our MSRs is subject to market risk since a significant driver of the fair value of these assets is the discount rates.
−Removed: A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $10.9 million as of June 30, 2020, while a 100 basis point decrease would increase the fair value by $11.5 million.
+Added: A 100 basis point increase in the weighted average discount rate would decrease the fair value of our MSRs by $12.4 million as of September 30, 2020 , while a 100 basis point decrease would increase the fair value by $13.2 million.
The COVID-19 pandemic has impacted the global economy in an unprecedented way, swiftly halting activity across many industries, and causing significant disruption and liquidity constraints in many market segments, including the commercial real estate markets, causing requests from tenants for rent deferral or abatement and delays in construction and development projects currently planned or underway.
These negative conditions may persist into the future and impair our borrowers' ability to pay principal and interest due to us under our loan agreements.
−Removed: We maintain a robust asset management relationship with our borrowers and are utilizing these relationships to address any potential impacts of the COVID-19 pandemic on our loans.
+Added: We maintain a robust asset management function that has strong relationships with our borrowers and are utilizing these relationships to address any potential impacts of the COVID-19 pandemic on our loans.
Although we have modified some loans that have resulted in interest rate concessions, and may continue to do so during the COVID-19 pandemic, we are encouraged by conversations with our borrowers and their responses to the pandemic’s impacts on their properties.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.